By  on December 2, 2008

Political demonstrations that have closed Bangkok’s airport for almost a week and traumatized Thailand’s tourism industry promise to derail retail profits and curtail the country’s economic growth.

Retail sales grew 5 percent in the first six months of 2008, but could come to an abrupt halt amid the country’s political unrest, Ian Gisbourne, head of research at Phatra Securities, said in a phone interview from Bangkok.

“The impact of all of this is significant,” said Gisbourne.

Thailand’s 2009 economic growth, forecast a month ago by Phatra Securities at 3.3 percent, now may not exceed 2 percent, Gisbourne said. The Bank of Thailand said tourist arrivals next year could fall to 3.4 million, a 40 percent decrease, if the shutdown of Suvarnabhumi airport and the political crisis drags on. Tourism constitutes 6 percent of Thailand’s gross domestic product, and Bangkok’s upscale shopping malls are dependent on tourists for at least a third of their business. The government has predicted that one million jobs could be lost because of the drop in tourism.

“Everyone is complaining, hotels and retailers,” said Santi Chudintra, director of the American marketing division of the Tourism Authority of Thailand.

Some 426,778 Americans visited Thailand during the first six months of this year, a 9 percent increase over 2007. Bangkok’s Suvarnabhumi airport is the 18th busiest in the world, and last year handled more than 40 million passengers.

The Bank of Thailand reported last week the nation’s exports grew 4.7 percent year-over-year, the slowest rate in six years. It also said private investments, consumption and manufacturing are showing signs of slowing. Manufacturing, the bank reported, rose 2 percent year-over-year, down from 4.3 percent in September. Business confidence is at its lowest level since 2000 and reflects concern over Thailand’s political uncertainty, the bank reported.

While demonstrations against the government by the People’s Alliance for Democracy have been mounted for the past month, they dramatically escalated as thousands of demonstrators took over Bangkok’s international airport last Tuesday. They forced the closure of the city’s domestic airport, Don Muang, on Thursday. An estimated 300,000 international tourists were stuck in Bangkok. The Thai government is offering stranded tourists $50 a day toward hotel costs. On Monday, protesters trying to force the prime minister’s resignation brought in thousands of reinforcements to occupy Bangkok’s two besieged airports.

The American Embassy in Bangkok has daily posted announcements that are increasingly tough in wording. On Saturday, the embassy posted a statement by Gordon K. Duguid, acting deputy spokesman, who urged the demonstrators to “walk away from the airports peacefully.”

The Board of Trade of Thailand told the Bangkok Post that the closure of the airport is costing importers and exporters almost $1 billion a day in damaged and lost cargo consisting primarily of food, agricultural products and electronics.

Rumors have swirled around Bangkok, and last week retailers feared the demonstrators were planning to target the upscale mall Siam Paragon, said a spokesman for the 5.4 million-square-foot center.

“They said they planned on attacking something very important to Thailand,” said Udom Suphpathom, public relations division manager of Siam Paragon.

The mall, a centerpiece of Bangkok’s retail district, is popular among Thais and tourists not only for its shopping, but for its entertainment, which includes movie theaters, restaurants, an aquarium, a health club and game rooms. More than 500 retailers, bankers and investors gathered Wednesday in a massive conference hall at Siam Paragon to discuss how the world’s damaged economy could affect the Thai one.

At Siam Paragon, sales are better than other malls, where business has been described as “so-so,” Suphpathom said. Already, plans are being laid to raise the 2009 advertising budget by 20 percent, he said.

For this holiday season, Siam Paragon plans a midnight sale and discounts to celebrate the mall’s third anniversary. Central Pattana Ltd. went ahead with plans for a Thursday grand opening of a new mall in a Bangkok suburb, despite the nearby demonstrations at Don Muang Airport.

Central Plaza Chaengwattana, a 3.2 million-square-foot, $1.4 billion mall, is one of four new retail centers Central Pattana plans to open in the next year. The retail developer has some $4 billion in retailing centers under way in Bangkok’s distant suburbs that represent 2.6 billion square feet of retail space.

Despite plummeting consumer confidence and the economic depression settling over Thailand, Gisbourne said the malls would appeal to the country’s emerging middle class outside Bangkok.

Gisbourne predicted private investment in Thailand would plummet in the fourth quarter — in part because foreign real estate investors, who typically like to inspect properties they are buying, won’t be coming. November, December and January are the peak of Thailand’s tourism season, he said.

The People’s Alliance for Democracy has been trying to topple Prime Minister Somchai Wongsawat, who they charge is a puppet of a billionaire predecessor, Thaksin Shinawatra, who was convicted of corruption and other charges and is now living in exile in the U.K. The alliance took over the prime minister’s office in August and twice blockaded Parliament, spurring street battles with police that left two dead and hundreds injured.

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